Johanes

JLS Currency Band Trading Model

FX_IDC:USDJPY   U.S. Dollar / Japanese Yen
The model is based on the consolidation of theories, global policies, practices and global regulations. The model being operated at highly leverage ratios (60x to 80x) for highest return expectation by strick portfolio's risk management for capital accumulation. By 2020 and forward however, the leverage ratios will be managed at lower ratios 20x to 40x after accumulated capital to reach the target. Collective buying and collective selling off-setting each other in the market to allow the porfolio to be managed at very high leverage ratios.
Mar 09
Comment: The theories:

Target zone theory, by Williamsons
Equilibrium exchange rate theory, by Williamsons
Currency band theory, by Paul Robin Krugman
Mar 09
Comment: The policies:

Plaza agreement
Louvre Agreement
EMS treaty
Monetarists' consensus
Mar 09
Comment: The practices:

Time series currency band of equilibrium exchange rate interior the exchange rate target zones
Time series interest rate differential-based of equilibrium exchange rate interior the exchange rate target zones
Mar 09
Comment: The regulations:

Inter-central banks communications
Inter-central banks consensus
Inter-central banks settlement prices (by CLS Bank)
Settlement memberships on currencies
Regulatory on large investment managers

Price regulations:

Price compression by TriOptima and Triana
Price settlement by CLS's members
Mar 09
Comment: Watch Dogs:

Relugar prices miss-alignment monitoring by IMF/BIS/OECD (quarterly report)
Regular prices monitoring by US Treasury, by the Act (quarterly report)
Regular prices monitoring by the Fed, by the Act (quarterly report)
Regular prices monitoring by global central banks (quarterly report)
General monitoring by NGOs, such as NBER, CEPR etc
Mar 09
Comment: Target zones managers/Price stability managers

Collective global central banks
Mar 09
Comment: Practitioners:

Global central banks' appointed prime dealers (each central banks appoint their FX dealers)
Mar 09
Comment: Current Active Traders (Counter Parties to Trade):

79 world's largest financial institutions, rose from 64 in 2014
Mar 09
Comment: 1. ABSA Bank Limited
2. American International Group, Inc.
3. Australia and New Zealand Banking Group Limited
4. Banco Bilbao Vizcaya Argentaria, S.A.
5. Banco Monex
6. Banco Popular Español, S.A.
7. Banco Santander, S.A.
8. Bank of China Limited
9. Bank of Montreal
10. Bank of Nova Scotia, The
11. Bank of Tokyo-Mitsubishi UFJ, Ltd., The
12. BankAmerica International Financial Corporation
13. Bank of America Merrill Lynch International Designated Activity Company
14. Bank Hapoalim B.M.
15. Bank Leumi le-Israel B.M.
16. Banque Internationale à Luxembourg
17. Barclays Bank Plc
18. Bayerische Landesbank
19. BNP Paribas SA
20. BNP Paribas Fortis Bank SA/NV
21. BNY International Financing Corporation
22. BNY Capital Corporation
23. Canadian Imperial Bank of Commerce
24. Citigroup Aggregation Inc.
25. Citibank, N.A.
26. Commerzbank AG
27. Commonwealth Bank of Australia
28. Coöperatieve Rabobank U.A.
29. Crédit Agricole S.A.
30. Crédit Agricole Corporate and Investment Bank
31. Credit Suisse (Switzerland) Ltd.
32. Danske Bank A/S
33. Daiwa Securities Co. Ltd.
34. DBS Bank Ltd.
35. DNB Bank ASA
36. Deutsche Bank AG
37. DZ BANK AG Deutsche Zentral-Genossenschaftsbank Frankfurt am Main
38. FirstRand Bank Limited
39. Goldman Sachs Group, Inc., The
40. HSBC Bank plc
41. ING Bank N.V.
42. Intesa Sanpaolo S.p.A.
43. J.P. Morgan International Financial Limited
44. KBC Bank NV
45. KEB Hana Bank
46. Kookmin Bank
47. JPMC Strategic Investments II Corporation
48. Lloyds Bank plc
49. Macquarie Bank Limited
50. Mizuho Bank, Ltd.
51. Morgan Stanley & Co. International plc
52. National Australia Bank Limited
53. National Bank of Greece S.A.
54. Natixis
55. Nomura International plc
56. Nordea Bank AB (publ)
57. Norinchukin Bank, The
58. Northern Trust Corporation
59. Oversea-Chinese Banking Corporation Limited
60. Royal Bank of Canada
61. Royal Bank of Scotland plc, The
62. Shinhan Bank
63. Skandinaviska Enskilda Banken AB (publ)
64. Société Générale
65. Standard Bank of South Africa Limited, The
66. Standard Chartered Bank
67. State Street Bank and Trust Company
68. Sumitomo Mitsui Banking Corporation
69. Sumitomo Mitsui Trust Bank, Limited
70. Svenska Handelsbanken AB (publ)
71. Swedbank AB (publ)
72. Toronto-Dominion Bank, The
73. UBS AG
74. UniCredit Bank AG
75. UniCredit S.p.A.
76. United Overseas Bank Limited
77. Wells Fargo Bank, N.A.
78. Westpac Banking Corporation
79. Zürcher Kantonalbank
Mar 09
Comment: TriOptima Sets New triReduce Record: $250 Trillion Gross Notional Value Compressed at LCH SwapClear During 2018
PUBLISHED BY: TriOptima

DATE: 2019-01-14

TriOptima, the leading multilateral compression provider that lowers costs and mitigates risk in OTC markets, today announced that it has set a new record for its triReduce portfolio compression service. In 2018, TriOptima compressed $250 trillion gross notional value of trades at LCH SwapClear, an annual increase of 31%.

This new record was driven by intensive participation of both dealers and their clients, increased trade submission to triReduce cycles and a wider adoption of the Trade Revision methodology, which improves compression efficiency by up to 50% by allowing a wider range of trade economics to be changed.

“We are proud that another record compression year continues to help the industry achieve important capital and operational cost reductions,” said Peter Weibel, Co-CEO TriOptima. “We look forward to working with our partners and clients in 2019 to achieve further efficiencies around benchmark conversion and risk transformation across over-the-counter and exchange-traded derivatives.”

“2018 saw many records broken in OTC clearing, including those for newly cleared activity and for subsequent compression. We look forward to continuing to work with our buy and sell side clients, and ACSP partner TriOptima, to compress their cleared OTC risk in SwapClear and thereby realise ever-greater efficiencies,” said Michael Davie, Global Head of Rates, LCH.

triReduce delivers multilateral compression to a liquidity pool of over 270 market participants in four asset classes: Rates, FX, Credit and Commodities. Compression is available across 28 currencies and 6 CCPs, and in multiple products, such as inflation swaps and cross currency swaps. As a network service, triReduce maintains a low barrier to entry, minimizing the technology costs and resource required to access the service.
Mar 09
Comment: triReduce's compression service surpasses $1 quadrillion in notional principal eliminated by market participants
PUBLISHED BY: Bryony Scragg

DATE: 2017-06-28

NEX Optimisation, which helps clients reduce complexity and optimise resources across the transaction lifecycle, announces today that participants in its triReduce compression service have eliminated over $1 quadrillion (1,000 trillion) in OTC derivative notional principal since its introduction in 2003.

triReduce is the premier multilateral risk-constrained compression service that offers compression for cleared and non-cleared interest rate swaps in 28 currencies, cross currency swaps, inflation swaps, credit default swaps, FX forward, and commodity swaps. Eliminating unnecessary swap inventory contributes to enhanced credit risk and capital management, reduces operational costs and risk, improves leverage ratios, and reduces systemic risk.

Peter Weibel, CEO of triReduce, said: “Hitting the $1 quadrillion mark is a significant achievement for the market. Our clients, both dealers and the buy side, are focused on eliminating as much notional principal as possible to meet regulatory goals and to manage their own balance sheets. We are proud to have worked together with our clients and other infrastructure providers where possible to achieve this goal.”

triReduce is continually expanding its catalogue to include new products and market segments, including dealer and customer cleared swaps in central clearing counterparties around the globe.
Mar 09
Comment: DERIVATIVES-Swaps compression hits US$1 quadrillion
Helen Bartholomew

LONDON, June 27 (IFR) - Derivatives users have eliminated more than US$1 quadrillion of notional outstanding in over-the-counter swaps through NEX Optimisation’s triReduce multilateral compression service since its 2003 launch by TriOptima.

The latest figure, which reflects a reduction in swaps notional equivalent to US$1,000trn, or 13 times global GDP, comes after banks embraced compression in response to stringent leverage ratio treatment under Basel III, tearing up superfluous contracts to slim down bloated derivatives portfolios.

Compression, which involves matching identical and offsetting trades between clients and netting them down into fewer line items, emerged as a vital activity following the 2009 G20 agreement, which aimed to reduce systemic risk through new swaps reporting and clearing requirements under Dodd-Frank in the US and EMIR in Europe.

That has piled additional pressure on dealers and buyside firms to eliminate unnecessary swap inventory as they cut the operational burden associated with unwieldy swaps books.

Notional outstanding of OTC swaps fell to US$483trn by the end of 2016, down from a US$707trn peak in 2011, according to the Bank for International Settlements, and largely driven by compression.

“Hitting the US$1 quadrillion mark is a significant achievement for the market,” said Peter Weibel, CEO of triReduce. “Our clients, both dealers and the buyside, are focused on eliminating as much notional principal as possible to meet regulatory goals and to manage their own balance sheets.”
Mar 09
Comment: CLS Bank
In February 2019:

The average daily traded volume submitted to CLS was USD1.73 trillion down 3.3 percent from USD1.78 trillion in January 2019.
Mar 09
Comment: IMF
By Samba Mbaye and Marialuz Moreno Badia
January 2, 2019

Until recently, we had a partial view of global debt. Our new update to the IMF’s Global Debt Database, first made public in May 2018, now fills even more of the gaps. We have compiled data on public and private debt for 190 countries, dating back to 1950, which now includes the latest numbers for 2017.

We make these data free and publicly available for all to use because we believe transparency can help create better public policy.

The long view

In the past, we had detailed information about some bigger economies, such as the United States and Japan, but existing databases either covered a narrow measure of debt—for example, bank credit—for a broad sample of countries, or a comprehensive one for a few countries and years. By including both the government and private sides of borrowing for the entire world, the Global Debt Database offers an unprecedented picture of global debt in the post-World War II era. From all these data we have gathered a few new insights on debt:

Global debt has reached an all-time high of $184 trillion in nominal terms, the equivalent of 225 percent of GDP in 2017. On average, the world’s debt now exceeds $86,000 in per capita terms, which is more than 2½ times the average income per-capita.

The most indebted economies in the world are also the richer ones. You can explore this more in the interactive chart below. The top three borrowers in the world—the United States, China, and Japan—account for more than half of global debt, exceeding their share of global output.

The private sector’s debt has tripled since 1950. This makes it the driving force behind global debt. Another change since the global financial crisis has been the rise in private debt in emerging markets, led by China, overtaking advanced economies. At the other end of the spectrum, private debt has remained very low in low-income developing countries.

Global public debt, on the other hand, has experienced a reversal of sorts. After a steady decline up to the mid-1970s, public debt has gone up since, with advanced economies at the helm and, of late, followed by emerging and low-income developing countries.
Mar 09
Comment: BIS: Bank for International Settlement Quarterly Review (Summary)
Marc 05, 2019

Shifting prospects for growth and monetary policy in major economies dominated market developments during the period under review.1 In December, investors' concerns that monetary policy would remain on a firmer course, despite a softening global economy, drove risky asset prices sharply lower. Starting in January, an accommodative turn in policy and improved economic signals in the United States lifted those prices again.

As 2018 drew to a close, international markets were rattled by growth worries and a renewed focus on policy uncertainty, triggering a flight to safety. Equities fell and corporate spreads widened across the globe. Sovereign yields dropped and curves flattened slightly as term premia slid. Amid a generalised repricing, US assets were hit particularly hard. In contrast, emerging market economies (EMEs) were relatively stable even as China continued to slow. In a sign of tightening financing conditions, high-yield corporate bond funds experienced large outflows, and low-rated loan and bond issuance contracted.

Financial markets found firmer footing in January, after central banks reaffirmed that monetary policy stood ready to adjust in light of risks to the global economy. The Federal Reserve reiterated that interest rate and balance sheet decisions would be data-dependent, and kept policy rates on hold, citing concerns about the global economy and muted inflation expectations. The ECB underscored rising risks to growth in the euro area, and highlighted that it was ready to deploy all policy tools as necessary. The People's Bank of China injected significant liquidity into the banking system, and introduced new policy tools as part of a multi-pronged effort to stimulate the slowing economy and bolster bank lending.

Buoyed by policy moves and renewed optimism, global markets surged in January and February. Just as investors became reassured that US monetary policy would remain accommodative, more favourable than expected macroeconomic indicators in the United States helped fuel a rally for risky assets. Equities and corporate bonds retraced earlier losses, exhibiting relatively high correlation across countries in the process. Prices of oil and industrial metals recovered. In EMEs, an initial weakening of the dollar helped sustain inflows to fixed income and equity funds, and government bond yields dropped after holding steady at the end of the year. Later in the review period, these inflows continued, but at a slower pace as the dollar appreciated.

Developments in Europe at times diverged from the cautiously improving global mood. Sovereign vulnerabilities receded in Europe at first, but picked up later in the period under review. Amid persistent economic weakness, Italian government spreads fell through January before inching up again in February, while yields on German bunds kept sliding, hitting their lowest point in more than two years. Although the outcome of Brexit negotiations became increasingly unclear, sterling and UK sovereign yields did not see large price movements. UK stocks rose.
Mar 11
Comment: This is likely the most valuable information
Mar 13
Comment: Treasury Analysis Under the 1988 and 2015 Legislation

Since 1988, the Treasury Department has been issuing reports to Congress that analyze international economic policies, including exchange rate policies, of the major trading partners of the United States. Two pieces of U.S. legislation govern the content of these reports.

The Omnibus Trade and Competitiveness Act of 1988 (the “1988 Act”) requires the Secretary of the Treasury to provide semiannual reports to Congress on international economic and exchange rate policy. Under Section 3004 of the 1988 Act, the Secretary must: “consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustment or gaining unfair competitive advantage in international trade.”

This determination is subject to a broad range of factors, including not only trade and current account imbalances and foreign exchange intervention (criteria under the second piece of legislation discussed below), but also currency developments, exchange rate practices, foreign exchange reserve coverage, capital controls, and monetary policy.

The Trade Facilitation and Trade Enforcement Act of 2015 (the “2015 Act”) calls for the Secretary to monitor the macroeconomic and currency policies of major trading partners
Mar 13
Comment: June 2018 by Fed Res Bank of New York

Pursuant to the 2015 Act, Treasury has found in this Report that no major trading partner met all three criteria during the four quarters ending June 2018. Similarly, based on the analysis in this Report, Treasury also concludes that no major trading partner of the United States met the standards identified in Section 3004 of the 1988 Act.
Mar 13
Comment: For the purposes of Section 701 of the 2015 Act, policies of the ECB, which holds responsibility for monetary policy of the euro area, will be assessed as the monetary authority of individual euro area countries.
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